“Super profits” of real estate agents back in the spotlight

surbuban housing

By Jackson Stiles

The arrival of Purplebricks has sparked renewed calls for reform of real estate agents, some of Australia’s least trusted professionals, who allegedly increased their pay by almost 600% in the last three decades.

The UK-based firm, which began its Australian operation last week, claims the market has been primed for its flat fees, “world-beating technology” and promise of transparency by years of real estate ripoffs.

Purplebricks chief executive Michael Bruce told The New Daily his company conducted extensive market research that found thousands of Australians hate negotiating and paying commissions to agents, and want to see more integrity in the industry.

“Everyday Australian people go out there and take the risk, the leap of faith, to live the Aussie dream of owning their own home, only to find when they come to sell it they’ve got no option, until now, but to fill the pockets of real estate agents with tens of thousands of dollars for a process they don’t really believe in, and don’t believe is fair,” Bruce said.

An analysis by economist Dr Stephen Koukoulas, paid for by Purplebricks, calculated that the “super profits” of real estate agents have risen by 585% over the last 30 years, from an average of $1970 to over $13,500 per sale, as a result of the decades-long boom in house prices.

Koukoulas estimated that the roughly 500,000 dwellings sold in Australia in 2015 cost about $6.75 billion in fees to the sellers. He said in a statement that agents are raking in higher commissions “for less work” because of the house price boom.

The Australian reported this week that 45 Ray White Group agents earned more than $1 million in commissions, and a further 278 earned more than $500,000, in the 2015-16 financial year.


Perhaps for this reason, real estate agents are among the least trusted professionals. They were ranked third-lowest, with a score of 10% for ethics and honest, after advertisers (9%) and car salesmen (4%) in a Roy Morgan survey of 655 Australians conducted in May.

Instead of commissions, Purplebricks charges a flat fee of $4500 for private treaty sales and $5325 for auctions. The fee is charged even if the property doesn’t sell. All offers and expressions of interest are sent to the seller’s login page on the Purplebricks website.

Neil Jenman, a prominent real estate consumer advocate, told The New Daily he hoped the new competitor would trigger a “shake-up” and “send a lot of typical agents out of the industry”.

“The industry keeps doing things to suit itself first, and the client second. These people [Purplebricks] are coming along saying they will do something to put the client first, and for that they deserve to win some more business.”

But he was less optimistic that the firm’s Australian employees would secure better sales prices: “If you have a choice between Purplebricks and your typical real estate agent, I would venture to say that Purplebricks is probably going to be better. Because if they are both incompetent negotiators, then you may as well take the one that charges the lowest fee.”

“Competition is not to be feared”

Real Estate Institute of Australia president Neville Sanders said new competition is welcome and “not to be feared”. But he questioned any market entrant’s claim to be more transparent.

“All agents have to be transparent because the law requires them to. Now if there is the odd one who overquotes or underquotes, or is not complying with their legal requirements, then the law should come down on them with full force,” Sanders told The New Daily.

“And so if an entrant comes in and says it wants to offer more transparency, is it actually different to what is currently occurring? Or are they simply using this opportunity so it’s newsworthy?”

Jackson Stiles is Money Editor at The New Daily, where this article was first published


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Rohan Baker
Rohan Baker
5 years ago

I seriously doubt that an agent who earns $1M p/a in commission is going to be a bad negotiator. I would be quite confident that they’re actually quite skilled at it. And the individual sub-agent doesn’t get all of that commission, only a percentage. Just like the sales rep selling you whitegoods or a car etc.

Jabir Kapasi
Jabir Kapasi
5 years ago
Reply to  Rohan Baker

Hi. As a real estate consultant, we have to be part of the transaction from start to end, including charting the flowchart of paperwork. We have to INNOVATE Service to keep our line exciting and delighting customers with our POSITIVE input. I am doing that. It’s challenging and interesting. Fees cannot be decreased. Value added services needs to be given.

5 years ago

purplebrick fees payable even if it does not sell. I think I will be prepared to pay a higher fee if it does sell rather than pay for something that could well be useless – and the fee is quite substantial for a ‘punt’ that it will get the result I want. At least with an agent they have an incentive to get a sale – no sale no fee – whereas with this mob it is a case of no care and no responsibility because they get paid regardless.

Blake Richards
Blake Richards
5 years ago

When you list with an agency without an advertised price your property will be shoved at a lower value position than you actually want. The agent will then find only offers that are below your hopes. You will then be cajoled into accepting a low offer on the basis that buyers don’t think your property is worth as much as you do.
Obviously the agents are working for themselves with a bias towards the buyer even though you are the one paying the commission. Easier for the agent—a little less commission is not a big deal.

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